You log in to your bank account. The balance looks healthy. There is a number with a few zeros in it. It feels safe. It feels like progress.
But here is what your bank statement does not tell you: that money is shrinking every year.
The gap between your interest rate and inflation
Most savings accounts in Singapore pay between 0.05% and 0.5% per year. Some high-interest accounts pay up to 2-3% if you meet specific conditions (salary crediting, card spending, insurance purchases).
Meanwhile, inflation in Singapore has averaged 3-4% per year over the past decade. In 2022-2023, it ran above 5%.
The maths is simple. If your money earns 0.05% and inflation runs at 3%, you lose about 2.95% of your purchasing power every year. On $100,000, that is roughly $2,950 per year in real value lost.
You do not see this loss. Your account balance stays the same or goes up slightly. But the things you buy with that money get more expensive. Year after year.
What $100,000 looks like after 10 and 20 years
| Scenario | After 10 years | After 20 years |
|---|---|---|
| Bank savings (0.05%)* | $100,500 | $101,005 |
| Inflation-adjusted value | $74,409 | $55,368 |
| Invested at 7% annually* | $196,715 | $386,968 |
Read that again. After 20 years in the bank, your $100,000 buys what $55,000 buys today. Invested at 7% annually*, that same $100,000 grows to nearly $387,000.
The difference is over $285,000. Same starting amount. Same 20 years. Different decision.
Why people still keep too much in savings
There are usually three reasons:
- It feels safe. The bank will not lose your money. This is true. But safety from loss is not the same as safety from erosion. Your money is protected from disappearing overnight, but it is not protected from slowly becoming worth less.
- Analysis paralysis. Too many options, too much conflicting advice, too much fear of picking the wrong thing. So people pick nothing and leave the money where it is.
- No clear plan. Without a framework for how much to keep liquid versus how much to invest, the default is to keep everything in savings "until I figure it out." That figuring-it-out moment never arrives.
How much should you keep in savings?
The answer depends on your situation, but a common guideline is 3 to 6 months of expenses as an emergency fund. This covers unexpected events: job loss, medical bills, urgent repairs.
Everything above that threshold is money that is slowly losing value in a savings account. It does not need to go into high-risk investments. But it does need to go somewhere it grows faster than inflation.
What "somewhere" looks like
There is a range of options between a savings account and day-trading stocks:
- Fixed deposits and Singapore Savings Bonds: 2-3%* annually. Low risk. Better than a savings account, but still below or at inflation.
- Diversified investment portfolios: Targeting 7-8%* annually over 10-20 years. Higher short-term volatility, but significantly better long-term outcomes.
- Dividend-generating funds: Producing $2,000 to $5,000* monthly income from a properly sized portfolio. This is what "making your money work for you" means in practice.
The right mix depends on your age, goals, risk tolerance, and how soon you need the money. There is no single answer that works for everyone.
The S.H.I.F.T. Method approach
In the S.H.I.F.T. Method, investing falls under "F" (Flow). But it comes after Snapshot (knowing where you stand), Heal (clearing bad debt), and Insure (protecting against catastrophe). You build cash flow on a solid foundation, not on top of cracks.
The cost of waiting one more year
Every year you leave $100,000 in a savings account instead of investing it, you give up roughly $7,000 in potential growth (at 7%*). Over 5 years of waiting, that is $35,000 in opportunity cost. Over 10 years, the gap compounds to over $96,000.*
You do not need a perfect plan to start. You need a clear first step.
If you want to figure out how much of your savings should be working harder, I am happy to sit down for 20 minutes and walk through the numbers. No pitch, no pressure.
Want to see what your savings should be earning?
20 minutes. No pitch. I will show you the gap between where your money is and where it should be.
Start a Conversation* All figures, percentages, and projections referenced in this article are for illustrative purposes only and are based on past performance. Past performance is not indicative of future performance. Actual results will vary depending on individual circumstances, market conditions, and the specific products or strategies selected. This article does not constitute an offer, solicitation, or recommendation to buy or sell any financial product. Please consult a qualified adviser before making any financial decisions.